Apple Pay 1 year in: Slow to grow, but 'off to a great start,' Apple says

Apple's attempt to reinvent mobile payments isn't a smash success, but the company still believes.

Tech companies have been trying to make mobile payments happen for years, and when Apple entered the space last October with Apple Pay, it seemed like paying for things with your phone might actually become a daily occurrence.

But Apple Pay adoption is still slow going a year after its launch, according to new reports. The service is barely a blip on the retail radar, accounting for about 1 percent of total transactions in the U.S., according to research firm Aite Group.

The Wall Street Journal dug up numbers from various retail chains and analysts that seem to back up that figure: At Panera, Apple Pay usage is in the “low single digits,” while Firehouse Subs says the service accounts for 2 percent of all transactions. (Panera did say that Apple Pay comprises 20 percent of sales in its iOS app, which lets customers order ahead.) Kantar Worldpanel ComTech said 75 percent of iPhone 6 and 6 Plus owners hadn’t even used Apple Pay, but that survey was done in April, just six months after the service launched.

The story behind the story: It’s clear that Apple Pay isn’t yet changing the landscape of mobile payments, but there are several other factors at play: The company has spent the last year nailing down agreements, both with retail chains and with various financial institutions to support cards from huge credit card companies and small regional credit unions. That’s an ongoing process. Apple just recently began expanding the service internationally, starting in Britain.

Square

Square’s new Apple Pay-compatible reader will help small businesses accept mobile payments.

How Apple Pay can succeed

Apple also just widened the base of people who can even use Apple Pay with the release of the iPhone 6s and 6s Plus. The company sold 13 million new phones over the launch weekend and countless more in the week since, so there are now millions more potential Apple Pay users. Now Apple has to educate them on what Apple Pay is and how it works, which has been one of the major hurdles preventing Apple Pay from taking off.

“People don’t know why it is they’d use Apple Pay,” Jared Schrieber, CEO of research firm InfoScout, told the WSJ. “They are satisfied with the current methods and they don’t know how Apple Pay works.”

Samsung and Google are also making a big play in mobile transactions with their Apple Pay rivals, Samsung Pay and Android Pay. The rising tide of payment options could lift all boats in this situation, especially as retailers finally have to install payment terminals that work with chip cards. Those terminals come with Near-Field Communication technology as a standard. And to help mom-and-pop shops get on board, Apple partnered with Square this summer on a new reader that will help small businesses accept mobile payments without spending a fortune to upgrade their payment systems. With iOS 9, Apple Pay now supports store loyalty cards and rewards programs, a feature many had been requesting.

It could take years for phones to replace wallets, but Apple is committed to making it happen.

“We’re off to a great start and we are seeing continued, double-digit monthly growth in Apple Pay transactions since launch,” the company told the WSJ.